Oregan Renewables plc planning to develop a wind farm off the coast of Dublin. It has historically financed projects using corporate financing but is considering using a project finance structure for this investment. It intends incorporating NewCo., a Special Purpose Vehicle, to develop the wind farm. It would operate the facility for 4 years and then sell it. The wind farm would be developed at the outset of the project (time 0) and would require an investment of 20,000,000. It expects to sell the facility at the end of year 4 for 1,000,000. Due to Government tax incentives, the sale of the facility would not be subject to tax. The expected production power generation is as follows: Year 1 2 3 4 MegaWatts Hour 12,000 12,000 12,000 12,000 NewCo. will enter into a contract to sell all electricity at a pre-agreed price of 1,100 per MegaWatt Hour. Payment will be received for electricity at the end of the year it is produced. Total costs are expected to be 300,000 in each year. Capital Allowances will be 1,000,000 per year. The marginal corporation tax rate is 50%. Oregan has estimated that the unlevered Beta for a listed wind energy firm, with a similar risk profile to NewCo., is 0.70. The project will be financed with a 7.5% fixed rate project loan of 17,000,000, with the remainder financed using an equity investment from Oregan. Interest is payable annually, capital repayments of 5,500,000 (end Year 1), 5,500,000 (end Year 2) and 6,000,000 (end Year 3) will be made. The risk-free rate is 1% and the market risk premium is estimated to be 5.5%. Required: (i) Using the Adjusted Present Value (APV) approach, estimate the value of this project. (25 Marks) (ii) Discuss the agency cost motivation for using project finance structures (10 Marks) (Total 35 Marks)